“Combining green innovation with digital tools isn't just good for the planet—it's a smart business move.”

— Yeong Jae Kim

Can combining green and digital innovation drive business growth?

Around the world, businesses face pressure to be both environmentally sustainable and digitally advanced. These two forces—eco-innovation and digital transformation—are increasingly seen not as competing priorities, but as complementary. In South Korea, where the government has actively promoted green and digital agendas through policies like the Green New Deal and Digital New Deal, firms in the manufacturing sector have begun to embrace this so-called "twin transition."

Yet while the benefits of each transition are well studied on their own, we know less about what happens when firms pursue both at once. Does the twin transition offer real business advantages—or is it a costly gamble? This study provides the first firm-level evidence from Korea, assessing how joint adoption of eco- and digital innovations affects company sales. The findings point to substantial economic payoffs.

Twin gains: Going green and digital together

Korean manufacturing firms that embraced both eco-innovations and digital technologies saw notably higher sales compared to those that adopted neither or only one. On average, firms that undertook the twin transition reported a 47% to 84% increase in sales, depending on the estimation method used. This effect was especially pronounced for firms combining environmental practices with technologies like AI, big data, cloud computing, IoT, 3D printing, and 5G.

Not all tech combinations yielded the same benefits. Pairing eco-innovation with blockchain, robotics, or augmented reality showed no statistically significant impact. This suggests that while some digital tools provide immediate business advantages when aligned with sustainability goals, others may take longer to deliver returns.

How the researchers tested it

The study draws on data from the 2022 Korean Innovation Survey, which covers 4,000 manufacturing firms across the country. Researchers narrowed the sample to 1,873 firms with complete data, focusing on whether firms had adopted eco-innovation and/or new digital technologies between 2019 and 2021.

To estimate the impact of twin adoption on business performance, the researchers used three complementary methods: instrumental variable regression (to account for endogeneity), propensity score matching (to compare similar firms), and the Heckman selection model (to address potential selection bias). In all approaches, the sales benefits of joint adoption were statistically robust.

What it means for industrial policy

The findings strongly support policies that encourage firms to pursue the twin transition. Rather than choosing between going green or going digital, firms can—and should—do both. Policymakers can help by offering targeted incentives, reducing regulatory uncertainty, and building infrastructure that makes it easier for businesses to integrate these innovations.

This research also offers a roadmap for where to prioritize investments. Technologies like AI and 5G are not just flashy—they deliver real value when paired with eco-conscious strategies. Governments and industry leaders looking to future-proof their economies would do well to focus on these high-impact pairings.

About the Paper

Title: The Impact of Twin Transition on Firms' Business Performance: Empirical Evidence from Korean Manufacturing Firms
Authors: Jihoon Choi and Yeong Jae Kim
Publication: Forthcoming in Energy Economics (2025) https://doi.org/10.1016/j.eneco.2025.108765
Data: Korean Innovation Survey 2022 (Science and Technology Policy Institute)
Design highlights: Instrumental variable estimation, propensity score matching, and Heckman selection models to identify causal effects on sales from joint adoption of eco-innovation and digital technology.